Correlation Between Franklin Resources and Air Products

Can any of the company-specific risk be diversified away by investing in both Franklin Resources and Air Products at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Franklin Resources and Air Products into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Franklin Resources and Air Products and, you can compare the effects of market volatilities on Franklin Resources and Air Products and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Franklin Resources with a short position of Air Products. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin Resources and Air Products.

Diversification Opportunities for Franklin Resources and Air Products

-0.43

Correlation Coefficient

Franklin Resources  Air Products

Very good diversification

The 3 months correlation between Franklin and Air is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Resources and Air Products and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Air Products and Franklin Resources is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Franklin Resources are associated (or correlated) with Air Products. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Air Products has no effect on the direction of Franklin Resources i.e., Franklin Resources and Air Products go up and down completely randomly.

Pair Corralation between Franklin Resources and Air Products

Considering the 90-day investment horizon Franklin Resources is expected to generate 1.32 times less return on investment than Air Products. In addition to that, Franklin Resources is 1.01 times more volatile than Air Products and. It trades about 0.0 of its total potential returns per unit of risk. Air Products and is currently generating about 0.01 per unit of volatility. If you would invest  26,709  in Air Products and on February 24, 2024 and sell it today you would lose (409.00) from holding Air Products and or give up 1.53% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	99.6%
Values	Daily Returns

Franklin Resources  vs.  Air Products and

Franklin Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Franklin Resources has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's technical and fundamental indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Air Products

Risk-Adjusted Performance

16 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Air Products and are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, Air Products exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Franklin Resources and Air Products

The main advantage of trading using opposite Franklin Resources and Air Products positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Franklin Resources position performs unexpectedly, Air Products can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Air Products will offset losses from the drop in Air Products' long position.

The idea behind Franklin Resources and Air Products and pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.